Contents

Executive summary
1 Indian mobile market overview
1.1 Second largest mobile market in Asia, but a long way from saturation
1.2 The rise of new ecosystem players is redefining the mobile industry in India
1.3 Market dynamics: a highly competitive market

2 The role of mobile in delivering innovation

and Digital India
2.1 Digital India: a government initiative to build a digital economy
2.2 Building Digital India through mobile
2.3 Innovation: mobile is changing the landscape of Indias digital industry

3 Mobile a key driver of growth and job creation in India

3.1
3.2
3.3
3.4

The economic contribution of the mobile ecosystem in 2015

Employment contribution of the mobile industry
Public funding contribution in 2014
Outlook and trends for 20152020

4 Regulatory enablers for Digital India

4.1 The fundamental importance of spectrum
4.2 Building the networks India needs
4.3 Ensuring a level playing field

Executive Summary
Mobile growth is increasingly focused on the developing world: more than 90% of the incremental 1
billion new mobile subscribers forecast by 2020 will come from developing markets. The number of
smartphone connections globally will increase by 2.6 billion by 2020, and again around 90% of that
growth will come from developing regions. China is already the largest smartphone market, but India
will be the real growth driver; it is set to add almost half a billion new connections over the next five
years. Total mobile revenues reached more than $1 trillion in 2015. However, slowing subscriber
growth, coupled with an increase in competition and a challenging macro-economic climate in many
developing markets, means growth over the next five years will be modest. The annual average
growth rate of just under 2% forecast for the period between 2015 and 2020 is less than half the rate
of the previous five years, with converging growth rates between developed and developing regions a
particular feature.
Subscriber base set to reach almost three-quarters of worlds population 2015 has been a year of
continued growth in the mobile industry, with more than 7.6 billion mobile connections1 (representing
4.7 billion unique subscribers) and operator revenues of more than $1 trillion. The acceleration of 4G
has been a major highlight; the global 4G connection base passed the 1 billion mark in late 2015. 4G
networks are now available in 151 countries across the world. The global subscriber penetration rate
now stands at 63%, with regional penetration rates ranging from 43% in Sub-Saharan Africa to 85%
in Europe. However, overall subscriber growth rates continue to slow, due to saturation in developed
markets and the difficulties of connecting low-income populations in developing markets. The global
subscriber base will reach 5.6 billion by the end of the decade, by which point over 70% of the
worlds population will have a mobile subscription.
India's telecommunication network is the second largest in the world based on the total number of
telephone users (both fixed and mobile phone).It has one of the lowest call tariffs in the world enabled
by the mega telephone networks and hyper-competition among them. It has the world's third-largest
Internet user-base. According to the Department of Telecommunication of India (DoT), as on March
2015, India has 302.35 million internet connections.
Telecommunication has supported the socioeconomic development of India and has played a
significant role to narrow down the rural-urban digital divide to some extent. It also has helped to
increase the transparency of governance with the introduction of e-governance in India. The
government has pragmatically used modern telecommunication facilities to deliver mass education
programmes for the rural folk of India.

INTRODUCTION
India is currently the worlds second-largest telecommunications market and has registered strong
growth in the past decade and half. The Indian mobile economy is growing rapidly and will contribute
substantially to Indias Gross Domestic Product (GDP), according to report prepared by GSM
Association (GSMA) in collaboration with the Boston Consulting Group (BCG).
The liberal and reformist policies of the Government of India have been instrumental along with
strong consumer demand in the rapid growth in the Indian telecom sector. The government has
enabled easy market access to telecom equipment and a fair and proactive regulatory framework that
has ensured availability of telecom services to consumer at affordable prices. The deregulation of
Foreign Direct Investment (FDI) norms has made the sector one of the fastest growing and a top five
employment opportunity generator in the country.

The Indian telecom sector is expected to generate four million direct and indirect jobs over the next
five years according to estimates by Randstad India. The employment opportunities are expected to be
created due to combination of governments efforts to increase penetration in rural areas and the rapid
increase in smartphone sales and rising internet usage.
International Data Corporation (IDC) predicts India to overtake US as the second-largest smartphone
market globally by 2017 and to maintain high growth rate over the next few years as people switch to
smartphones and gradually upgrade to 4G.

The digital transformation we are witnessing across most industry sectors and throughout the world
presents a clear opportunity for players from across the mobile ecosystem. The challenge is to seize
the opportunity and to respond through service innovation. Against the backdrop of a renewed and
flexible regulatory environment, consumers and society as a whole will reap the benefits of significant
technological and socio-economic development.
The history of Indian telecom can be started with the introduction of telegraph. The Indian postal and
telecom sectors are one of the worlds oldest. In 1850, the first experimental electric telegraph line was
started between Calcutta and Diamond Harbour. In 1851, it was opened for the use of the British East
India Company. The Posts and Telegraphs department occupied a small corner of the Public Works
Department,at that time.The construction of 4,000 miles (6,400 km) of telegraph lines was started in
November 1853. These connected Kolkata (then Calcutta) and Peshawar in the north; Agra, Mumbai
(then Bombay) through Sindwa Ghats, and Chennai (then Madras) in the south; Ootacamund and
Bangalore. William O'Shaughnessy, who pioneered the telegraph and telephone in India, belonged to
the Public Works Department, and worked towards the development of telecom throughout this
period. A separate department was opened in 1854 when telegraph facilities were opened to the
public.
Indian telecom industry underwent a high pace of market liberalisation and growth since the 1990s
and now has become the world's most competitive and one of the fastest growing telecom

markets. The Industry has grown over twenty times in just ten years, from under 37 million
subscribers in the year 2001 to over 846 million subscribers in the year 2011.

India has the world's second-largest mobile phone user base with over 929.37 million users as of May
2012. It has the world's second-largest Internet user-base with over 300 million as of June 2015.
In 1880, two telephone companies namely The Oriental Telephone Company Ltd. and The AngloIndian Telephone Company Ltd. approached the Government of India to establish telephone exchange
in India. The permission was refused on the grounds that the establishment of telephones was a
Government monopoly and that the Government itself would undertake the work.
In 1881, the Government later reversed its earlier decision and a licence was granted to the Oriental
Telephone Company Limited of England for opening telephone exchanges at Calcutta,
Bombay,Madras and Ahmedabad and the first formal telephone service was established in the
country.] On 28 January 1882, Major E. Baring, Member of the Governor General of India's Council
declared open the Telephone Exchanges in Calcutta, Bombay and Madras. The exchange in Calcutta
named the "Central Exchange" had a total of 93 subscribers in its early stage. Later that year, Bombay
also witnessed the opening of a telephone exchange.
As a result, the Indian telecom market is one of the most liberalised market in the world with private
participation in almost all of its segments. The New Telecom Policy (NTP-99) provided the much
needed impetus to the growth of this industry and set the trend for liberalisation in the industry.

Indian mobile 1 market overview 1.1

Second largest mobile market in Asia, but a long way from saturation
India had 482 million unique subscribers and nearly 1 billion connections (excluding M2M) as of the
second quarter of 2015. It is the second biggest mobile market in the world in terms of subscribers,
second only to China. The Indian market accounts for a quarter of Asia Pacifics unique subscribers
and connections, and 13% of the global subscriber base. However, India has a unique subscriber
penetration of less than 40%, slightly below the regional average figure of 46%. This underscores the
longer term subscriber growth potential in the market, but also the challenge for both operators and
policy-makers in the country to connect the unconnected populations.
India will add 250 million new subscribers over the period to 2020, equivalent to nearly half of the
forecast subscriber growth in Asia Pacific over the next five years. As a result, Indias share of total
subscribers in the region will rise to 30% by the end of this decade, while unique subscriber
penetration will grow by 17 percentage points. Subscriber growth will be significantly faster than in
the broader region, narrowing the penetration gap with the regional average.

The move to 3G is accelerating, helped by network sharing.

The migration to higher speed 3G services has continued apace since the formal launch of 3G services
in India in 2009. 3G accounts for 12% of total connections and will rise to almost 40% by the end of
this decade. Operators have significantly reduced the cost of 3G data services since launch, and
together with the rapid expansion of 3G network coverage these have been crucial to the growth of 3G
connections in India. Network sharing has played a key role in increasing network coverage costeffectively. In a little over five years since the launch of the first commercial 3G network in India, 3G
network coverage has now reached three-quarters of the population.
The growth trajectory of 3G services in India mirrors that of many other countries in the region,
despite the relatively late arrival of the technology. However, to date the Indian market has seen
limited rollout and adoption of LTE/4G networks. As of mid-2015, less than 1% of connections in
India were running over 4G networks, compared to the regional average of more than 11%. An
obstacle to the take-up of 4G in India has been the lack of relevant spectrum (both the right spectrum
bands and amount of spectrum licensed). The lack of affordable, harmonised spectrum in the sub-1
GHz coverage bands has been a major factor in limiting the deployment of 4G networks in India,
along with the high cost of spectrum, which makes it difficult for operators to build a viable business
case for investment in network deployments. However, a number of operators have launched (or are
about to launch) 4G services, and domestic and international manufacturers have released more
affordable 4G devices. Airtel has expanded its 4G services to 296 cities across the country, with
services priced at the same level as 3G. Airtel is using the 2300 MHz band, as will new entrant
Reliance Jio, which aims to build out its network to initially cover more than 5,000 towns and cities.
Other operators such as Vodafone and Idea are in the process of launching 4G using 1800 MHz
spectrum. The continued migration to mobile broadband services, more affordable tariffs and devices,
and growing uptake of new apps and services are all driving strong data traffic growth in India.
Airtels mobile data traffic grew by 95% in the year to September 2014, and Reliance
Communications recorded data traffic growth of 75% over the same period. According to the latest
Cisco Visual Networking Index (VNI) forecast, annual mobile data traffic in India will grow 13-fold
between 2014 and 2019, a CAGR of 66%.

1.2 The rise of new ecosystem players is redefining the mobile industry in India
Local ecosystem players have emerged across different parts of the mobile value chain, notably
device manufacturing and content development, to compete with established global players operating
in the market. The main attraction for the products and services developed by these firms is their
tendency to address pertinent challenges faced by the local consumer, especially around content,
usability and cost.
Geographic focus of mobile ecosystem shifting towards the developing world North America remains
the epicentre of the technology industry and responsible for many of the innovations now taken for
granted. Despite a host of new emerging challengers, operating systems originating in North America
continue to dominate the global smartphone market, accounting for around 95% of global sales in
2014. New services originating in the region continue to scale rapidly, both domestically and
internationally, particularly those based on the new sharing economy, such as Uber and Lyft. Europe
has seen its once dominant position in areas such as handset manufacturing and equipment eroded
over recent years. There are though still a number of areas of particular success in Europe; for
example, four of the global top five mobile app-based gaming companies are European an area of
genuine market-leading expertise in the digital arena. Data from Vision Mobile indicates that in the
first quarter of 2015 there were more than 1.3 million app developers in the EU28, equivalent to
around 23% of the total global developer base However, the momentum of innovation is increasingly
swinging towards developing markets, which are set to see the vast majority of growth in terms of
new subscribers and smartphones over the next five years. Innovative mobile ecosystems are
developing in many countries. China, for example, is already home to almost 900 million mobile
internet users, with high levels of mobile app usage. The country has seen a number of innovations in
the app economy, with local developers helped by the relative absence of some of the more
established global internet players such as Google. Several players have listed on the public markets
and now have market capitalisations that are beginning to rival those of the more established internet
giants in the West. India is now among the top three markets globally for app downloads from the
Google Play Store, according to App Annie. The domestic Indian app economy is developing rapidly
with apps that address a variety of topics, from basic information and entertainment services to ecommerce and e-government applications, published by local developers and content providers.

1.2.1 Local device vendors are helping to accelerate smartphone adoption

Smartphones account for around 20% of total mobile connections in the Indian market, lower than the
regional average of 40%. However, in absolute terms, India is already the third-largest smartphone
market globally, with 185 million connections as of mid-2015. The main challenges faced by local
consumers looking to upgrade from feature phones to smartphones are the cost of devices and the
affordability of data services. The sheer size of the smartphone market has already attracted a range of
local and international manufacturers; several overseas manufacturers have announced plans to shift
production to the Indian market. The emergence of a local smartphone manufacturing ecosystem
focussed on producing low-cost smartphones will play a vital role in meeting the demand for higher
specification devices, a development that is in line with the governments Make in India drive to
encourage local manufacturing. This is already having a significant impact on the market: the average
selling price (ASP) of smartphones in India has almost halved since 2011, to less than INR15,000 in
2015. Despite the notable rise in smartphone adoption since the launch of 3G networks, feature
phones remain an essential part of the mobile landscape that will be vital to connecting the large rural
population.
Asian markets such as South Korea, Japan and China are driving the development of 5G mobile
technologies, in a similar way to how Europe pioneered 3G and North America led 4G. With high or
rapidly growing levels of 4G adoption, supportive governments and ambitious launch targets (linked
to flagship sporting events), operators in these countries are challenging North American counterparts
such as Verizon, which is initially focusing on 5G as a fixed-wireless solution. We expect to see some
kind of commercial 5G launch in all three countries by 2020, despite the fact that 5G standardisation
is not scheduled to be completed until then. Operators in South Korea have announced plans to launch
5G services in readiness for the 2018 Winter Olympics in the country, with nationwide deployments
by 2020. The countrys leading mobile operators plan to undertake a number of trials over the next
year, with for example NEC announcing the successful completion of a proof-of-concept trial with
KT Corporation for a 5G wireless backhaul solution that uses E-Band spectrum (70-80 GHz). SK
Telecom also completed the field trial of 2800 MHzbased 5G services along with Samsung and plans
to develop 5G pilot networks before the end of 2016. In Japan, Tokyo Tech, Sony, JRC and KDDI
Labs have jointly developed a wave-based, high-throughput wireless access network for large-scale
data content distribution in the 40 GHz and 60 GHz bands. Development of mmWave represents a
key technology for the heterogeneous networks that will be used for 5G. China is also committed to a
rapid move to 5G, with its Ministry of Industry and Information Technology (MIIT) indicating that
5G will be commercially available in the country by 2020. Chinese operators have announced a
number of partnerships to work on 5G (including the recent announcement by China Unicom and
Ericsson). The EU has also signed an agreement to cooperate with China on the development of 5G,
including the jointfunding of research in a number of areas such as standardisation and spectrum use.

1.3 Market dynamics: a highly competitive market

Indias mobile market is highly competitive; it has 12 active mobile operators and a HerfindahlHirschman Index4 (HHI) of less than 2,000. India is by some way the most competitive of the 20
largest markets in AsiaPacific. The country is divided into 22 telecoms zones, called circles, with the
number of operators present in each circle ranging from six to 10. Reliance Jio plans to launch
commercial operations by the end of 2015. The operator has a nationwide unified licence and plans to
provide 4G services across the 22 circles.
Market competition has caused prices to drop. Call tariffs in India are now among the lowest in the
world. India had the fourth lowest subscriber ARPU in Asia Pacific as of the second quarter of 2015.
While the impact of low tariffs is partially offset by relatively high voice usage (India has the second
highest minutes of use MOU after China, in Asia Pacific with 376 minutes), there is limited scope
for MOU to rise further due to the growing use of online communication services provided by internet
players.
China has been the key driver of the regional (and global) smartphone market to date, with 890
million connections and a smartphone adoption rate of 68% at the end of 2015. However, growth rates
have now slowed sharply, with the smartphone market now largely in replacement mode, driven by
subscribers upgrading to higher-end devices and the migration from 3G to 4G. India is set to become
the worlds second largest smartphone market in the second half of 2016, overtaking the US, with
more than 320 million smartphone connections forecast for the end of 2016. With smartphones
accounting for less than a quarter of total connections at the end of 2015, India will emerge as the
main driver of smartphone growth in the region over the next few years, adding close to half a billion
new smartphone connections by the end of 2020. This will take the adoption rate in India to 54%,
highlighting the scope for smartphone sales in the future as the devices and data services become
more affordable, digital literacy improves and more locally relevant content is made available.
Myanmar has been a notable smartphone success story in the region, with uptake mirroring the rapid
subscriber growth in the country. With a total smartphone base of 25 million at the end of 2015, the
smartphone base experienced 3.5-fold annual growth, the fastest of any country in the region.
Myanmar was relatively late to liberalise the mobile market and has seen its youthful population
leapfrog basic and feature phones and become active data users, helped by the growth of more
affordable low-end smartphones and an operator focus on driving data usage in the countrys rapidly
expanding subscriber base. South Korea, Japan and China have been the traditional smartphone
manufacturing hubs in the region. However, more recently a number of local smartphone
manufacturers have been gaining share in countries such as India (Micromax, Lava, Karbonn), the
Philippines (Cherry Mobile, MyPhone, Torque), Indonesia (Advan, SmartFren, Evercross), Thailand
(I-Mobile) and Vietnam (Mobiistar). With low smartphone penetration, most of these SouthEast Asian
countries offer a lucrative market for local as well as global brands.

1.3.1 Competition and new messaging services continue to weigh on revenue growth
Revenue growth in Indias mobile market has moderated significantly over the last decade from more
than 30% in the mid-2000s to single digits in the last three years. In 2014, operators recorded total
revenue of $29.8 billion, a 6% increase on the previous year. Recurring revenue growth has seen the
biggest decline in recent years, driven by a combination of intense price competition and the
increasing cannibalisation of operators traditional services by online communications services.
Recurring revenue growth will pick up in 2017, partly due to forecast connections growth over the
next two years, but will trend downwards again in the latter part of this decade due to slowing
subscriber growth and the ongoing impact of competitive pressures.
Although the uptake of smartphones provides an opportunity for data revenue growth, mobile
operators in India have so far reported limited revenue contribution from data services. One challenge
for operators is the need to recover the high costs of spectrum; operators bid around $18 billion in the
latest round of spectrum auctions in March 2015. Competitive pressures and low income levels also
mitigate against the ability of operators to pass these costs onto consumers. As a proportion of
recurring revenues, average data service revenues are slightly below 15%, compared to more than
30% in advanced countries in the region. The challenge for operators is to continue to monetise the
growth in data traffic and the uptake of data-centric services by consumers. Over recent years,
operators have also made significant investments in building out mobile coverage and upgrading to
mobile broadband; capex over the last four years totalled in excess of $18 billion. Capex is likely to
increase going forward, as operators invest further in network coverage and increasingly in 4G
network deployments. Capex levels in India are also influenced by the absence of efficient spectrum
allocations, which makes it more capital intensive to add network capacity. Several operators
including Idea Cellular and Bharti Airtel have recently increased their guidance for capex levels for
the current financial year.

1.3.2 Margin erosion and spectrum costs are likely to stimulate market
Despite operators efforts to minimise capex and operating costs through network sharing and
managed services agreements, there is growing pressure on their operating margins due to sluggish
revenue growth and competitive challenges. EBITDA margins have also come under pressure from
the cost requirements of coverage expansion to underserved areas. Although there has been some
recovery in margins over recent years, they remain below the developing market average. The outlook
remains uncertain, with a new entrant launching and the possible introduction of MVNOs to further
increase competitive intensity. Competition has played an important role in making mobile services
affordable to end users over recent years. However, operators may need to move to more sustainable
business models through consolidation if they are to justify the high levels of investment required to
support mobile broadband network expansion. Unlike India, the majority of emerging markets have
only three or four mobile operators, as is also the case in Europe and the US. Although regulators and
policy-makers in many markets have been concerned about the impact of consolidation, research by
Frontier Economics for the GSMA has highlighted that the right market structures can incentivise
mobile broadband investments that deliver both lower unit prices and improved quality5 . The
research found that the main driver of lower prices in emerging markets over the last ten years has
been investment, rather than market competition. Ensuring that the industry structure supports
investment in mobile markets should be an important aim for policy-makers. The large number of
operators in India also limits the amount of spectrum available to each operator. The resulting
spectrum scarcity in a highly fragmented market leads to higher network deployment costs, as
operators need to build more cell sites to improve service quality. The market will only consolidate if
regulatory policies enable such an environment, particularly around issues such as spectrum transfer.
The warning signs regarding spectrum were present before WRC-15. The existing 700 MHz band is
key to bringing affordable 4G mobile broadband services to all parts of Asia Pacific from urban
centres to rural villages yet few governments in the region have licensed it. As a result of WRC-15,
many countries in the region are now at a disadvantage when it comes to supporting rapidly growing
mobile broadband uptake and usage as well as advanced 4G, and in future 5G, services. Governments
need to agree on a harmonised set of new bands for 5G use and work to identify them at the next
WRC in 2019. The Internet of Things (IoT) picture in Asia Pacific is more positive. Asia Pacific
dominates the global market for cellular M2M connections, with China the worlds largest cellular
M2M market, exceeding 100 million M2M connections at the end of 2015, representing almost a third
of the global base. This highlights Asia Pacifics strong position in the wider Internet of Things - the
coordination of multiple machines, devices and applications connected to the internet through
multiple networks, including machine to machine (M2M) and low-power, widearea (LPWA)
networks.

2.The role of mobile in delivering innovation and Digital India

The Indian mobile industry has come a long way since the first mobile call was made in 1995 from
mobile phone ownership being viewed as a luxury to becoming a utility. The Indian mobile industry is
already helping to deliver a growing and innovative mobile ecosystem, which is transforming not only
how people communicate but increasingly how they do business. The India government has
recognised the potential of digital technologies to address some of the socio-economic challenges in
the country with the launch of its Digital India initiative. This looks to empower 1 billion subscribers
by providing Internet access to all and make broadband a utility for every citizen. The lack of
alternative (fixed line) infrastructure in the country means that mobile technology will play a central r
ndias mobile industry is playing a key enabling role in the Digital India initiative, launched in July
2015, which aims to transform India into a digitally empowered society and provide broadband
connectivity to all. Due to the relative lack of fixed-line infrastructure in the country, mobile is
already the dominant platform for internet access. The number of individuals accessing the internet
over mobile devices has grown from less than 100 million subscribers in 2010 to nearly 300 million at
the end of 2014.

However, network coverage and digital literacy remain key barriers to further extending mobile
internet access, as many of Indias unconnected communities reside in rural or remote areas. The
report outlines a number of strategies that will help close this digital divide and support the costeffective deployment of mobile broadband across the country. These include an increase in the
availability of harmonised spectrum at a reasonable price, as well as a reduction in mobile-specific
taxation that will serve to make mobile broadband more affordable for consumers and maximise the
ability of mobile operators to invest in their networks. The report also highlights the need to adapt
regulatory frameworks to reflect the new market dynamics that have brought changes to traditional
mobile communication services.

2.1 Digital India: a government initiative to build a digital economy

Digital India pulls together many existing schemes that will be restructured and re-focussed for
greater impact. Under the plan, the government has identified three key areas and nine pillars as
shown in the chart.
The Government of India entity Bharat Broadband Network Limited which executes the National
Optical Fibre Network project will be the custodian of Digital India (DI) project. BBNL had ordered
United Telecoms Limited to connect 250,000 villages through GPON to ensure FTTH based
broadband. This will provide the first basic setup to achieve towards Digital India and is expected to
be completed by 2017.
The government is planning to create 28,000 seats of BPOs in various states and set up at least one
Common Service Centre in each of the gram panchayats in the state.
The 2016 Union budget of India announced 11 technology initiatives including the use data analytics
to nab tax evaders, creating a substantial opportunity for IT companies to build out the systems that
will be required. Digital Literacy mission will cover six crore rural households.It is planned to connect
550 farmer markets in the country through the use of technology.
The Digital India programme is a unique opportunity for Indias government and mobile industry to
work together on a common agenda to transform the country into a digitally powered society and
economy, added Sinclair. Ensuring high-quality, widely available and affordable mobile broadband
will be critical to delivering this ambitious vision, which will require a regulatory framework and
approach to spectrum that encourages investment and innovation.

2.2. Building Digital India through mobile

This programme was envisaged by the Department of Electronics and Information Technology
(DeitY), which will be responsible for overall coordination of the project. The government is playing
an active role in the implementation of Digital India, with the Prime Minister of India heading the
monitoring committee, along with an advisory group chaired by the Minister of Communications &
IT and an apex committee chaired by the Cabinet Secretary. The government has estimated that the
overall cost of implementing the programme could amount to nearly INR100,000 crore for ongoing
schemes and around INR13,000 crore for new schemes and activities. Mobile operators in India have
already taken steps to participate in the implementation of Digital India. In July 2015, operators
including Airtel, Reliance Group and Aditya Birla Group (Idea Cellular), committed to investing
INR450,000 crore in network rollout, and broadband and Wi-Fi deployment to facilitate the delivery
of various services under the initiative. Mobile technology and the activities of key ecosystem players,
including operators, handset manufacturers and content developers, are all helping realise the Digital
India initiative. However, mobile operators and the broader mobile ecosystem have the capacity to
make a much greater contribution and are seeking a greater role in the overall program. In particular,
the wider deployment of mobile broadband, and more affordable mobile services, will be key in
allowing the country to meet the targets of the program.
With India emerging as the key driver of subscriber and smartphone growth over the rest of this
decade, its importance as an innovation centre will continue to build. Apple recently announced its
intention to open an iOS developer centre in Bangalore, Indias main technology hub. Bangalore is
also home to some of the countrys leading start-ups, such as Ola (a rival to Uber) and e-commerce
company Snapdeal. These two companies are examples of the growing number of Indian unicorns
(start-ups with a valuation of at least $1 billion) operating in a range of sectors including data
analytics, mobile advertising and digital wallets. The India government has recognised the
transformative potential of technology with the development of its Digital India initiative, which
looks to empower 1 billion people by providing Internet access to all and to make broadband a utility
for every citizen. Mobile operators and the broader mobile ecosystem in the country have the capacity
to make a significant contribution to achieving these goals and are seeking a greater role in the overall
programme

2.2.1 Digital inclusion

Mobile technology will play a major role in realising the Digital India vision, with mobile already
the dominant platform for internet access in the country. There is a lack of alternative infrastructure,
with fixed broadband penetration in India standing at only 2.5%. In contrast, 6090% of the
population (depending on the circle) have access to at least a 2G service. The increasing deployment
of higher speed mobile broadband technologies is supporting a variety of feature-rich content and
value-added services. By working closely with mobile operators, the government is more likely to
realise the goals of the Digital India programme. The number of individuals accessing the internet
over mobile devices has expanded from less than 100 million subscribers in 2010 to nearly 300
million at the end of 2014. The penetration of mobile internet has seen a more than threefold increase
over this period, reaching 24% of the population by mid-2015. This figure will almost double again in
the next five years to reach 44% of the population by 2020, with around 600 million mobile internet
subscribers by this date. However, despite the impressive progress, this will still leave a huge digital
divide in the country. By the end of the decade, more than half of the population will still lack internet
access, with most of the excluded population living in rural areas. There is also an important gender
gap to be addressed; women in India are 36% less likely to own a mobile phone than men, which
equates to 114 million Indian women.
Digital inclusion defined as the expansion of global connectivity and mobile Internet adoption can
extend various economic and social benefits to previously unconnected populations, fuelling a
virtuous circle that reduces poverty, improves infrastructure and services, and further increases
internet access and usage. By extension, unconnected and underserved communities risk falling
further behind, widening the digital divide, if the barriers to digital inclusion remain unaddressed.

The GSMA launched its Digital Inclusion programme in April 2014 to help expand mobile
connectivity and to increase mobile internet adoption by addressing the key barriers to mobile internet
access, both in India and across the world:
Network infrastructure and policy: increasing network coverage to currently unserved areas.
Affordability and taxation: the combination of low incomes, cost of devices, charging fees, and
data plan payments creates an affordability barrier to accessing the mobile internet. This issue is
compounded by government taxes and fees, such as airtime and handset taxes.
Digital literacy and local content: Illiteracy, digital illiteracy and lack of internet awareness are
challenges to mobile internet adoption. The availability of content that is both in the local language
and locally relevant can play a vital role in the adoption of the mobile internet.
4G connections to triple and initial 5G deployments to commercialise by 2020 The region is seeing an
accelerating technology migration to 4G, with the number of 4G connections increasing by 2.5 times
over the course of 2015 and now totalling in excess of 600 million. South Korea, Japan and China
have been the leaders in 4G adoption. South Korea has the highest adoption rate of any market
globally. A number of previously laggard markets in Asia Pacific are now migrating to 4G, including
the likes of Thailand, Malaysia and the Philippines. This is being driven by a number of factors
including ongoing network investments by operators, falling device prices and growing consumer
appetite for higher speed mobile. For operators there is the benefit of an uplift in data consumption
from the move to 4G, as observed in markets across the world. The regions technology leaders
South Korea, Japan and China are now driving the development of 5G mobile technologies, in a
similar way to how Europe pioneered 3G and North America led 4G. With high or rapidly growing
levels of 4G adoption, supportive governments and ambitious launch

2.2.1.1 Building network infrastructure in underserved areas

Network coverage remains a key barrier to further increasing mobile internet access in India, with
much of the still unconnected population living in rural or remote areas. Nearly 70% of the Indian
population lives in villages, but overall urban teledensity (mobile and fixed line) is still significantly
higher than in rural areas. According to the Ministry of Communication and Information Technology,
nearly 10% of Indian villages had no mobile coverage from any of Indias mobile operators as of
March 2015. The majority of these are in the states of Odisha, Arunachal Pradesh, Jharkhand and
Madhya Pradesh.7 Rural coverage is lower for mobile broadband networks, therefore excluding a
significant proportion of the population from the benefits of mobile internet that can transform their
lives. A combination of a difficult terrain, characterised by mountains and sparsely populated
farmlands, high energy costs and low income levels often makes it uneconomical for mobile operators
to expand coverage to rural communities using conventional network deployment strategies. A recent
report by the GSMA analysed three broad strategies to address the coverage gap, namely network
sharing, government support and alternative technologies (such as drones, balloons or satellites)8 .
The first two are particularly relevant to the Indian market. One strategy that has proved successful in
India is voluntary network sharing (passive and active). India was one of the first countries in Asia to
adopt network sharing, with the Department of Telecommunications modifying operators licence
conditions in 2007 to allow passive sharing, and again in 2008 to allow active sharing. The Tower and
Infrastructure Providers Association (TIPA), a body representing telecoms tower companies
(towercos), estimates that India needs a minimum of 200,000 additional towers to ensure robust
connectivity for voice calls and data services, which at an average cost of INR5 lakh per tower will
require investment of about INR10,000 crore to bridge the coverage gap. A number of towercos such
as Bharti Infratel, Indus Towers, Viom Networks and Reliance Infratel have since emerged as key
players in the infrastructure market, controlling 70% of the overall tower count of around 400,000.
Tower sharing has stimulated investment and competition in Indias tower market, with a four-fold
increase in the number of towers between 2007 and 2014. For the operators, this has resulted in
significant capex and opex savings, as well as considerable improvements in quality of service as
passive and active network sharing have helped boost capacity in areas of high demand. Aside from
tower sharing, mobile operators are employing a variety of solutions to tackle the challenge of offgrid connectivity, including the use of green options such as solar, wind, water, biomass and fuel cells
to power cell sites in remote communities. Such alternative energy sources can significantly reduce
energy costs, which are the biggest cost component in off-grid cell sites that rely on diesel generators.
For example, Idea Cellular has been pioneering the use of renewable energy, particularly solar, to
power offgrid cell sites and so reduce both costs and carbon emissions.

2.2.1.2 Making mobile internet affordable

While network coverage is key to making services available, take-up of these services is affected by
their cost. A report by telecoms regulator TRAI shows that rural consumers spend considerably less
than their urban counterparts on mobile services, mainly due to affordability issues9 . The cost of
ownership of a mobile phone (which covers all the costs associated with both owning a phone and
accessing mobile services10) is a key factor in mobile internet adoption, particularly in India where
nearly one-third of the population (360 million people) lives below the poverty line. Data tariffs in
India, at 0.50.7 cents per MB, are among the lowest in the world, but a significant proportion of the
population is unable to afford this for regular internet use due to low disposable incomes. Aside from
data tariffs, the declining cost of smartphones bodes well for smartphone adoption in India. Around
20% of mobile connections in the country are now smartphone-based, and this is expected to rise to
more than 50% by 2020. The growing number of local handset manufacturers, as well as the presence
of international players focused on the lower-end price segments, should further improve handset
affordability. Taxation can act as a barrier to improving the affordability of services, as taxes on
mobile services for consumers increase their price, while sector-specific levies on operators (including
the high cost of spectrum in India) reduce the funds available for investment.
Affordability is the second most important barrier highlighted by the survey. Mobile operators in Asia
currently offer some of the worlds most competitive mobile internet tariffs, but the average cost of
mobile ownership, which includes both the cost of the device and the cost of mobile services (voice,
SMS and data) as a share of income varies considerably by income group. Those in the top 20%
would, on average, expect to spend 2% of their income, while those in the bottom 40% would spend
13%. As a result, owning and using a phone is unaffordable for many. Mobile operators in Asia
Pacific have been creatively managing their pricing plans to suit customer needs. They will need to
continue to work to ensure that data packages are affordable for all segments, particularly lower
income groups.

2.2.1.3 Increasing digital literacy and local content

Consumer literacy (basic, digital, internet and mobile internet)11 is essential to understanding a
mobile phones user interface, reading its display and using its keyboard. Nationally, almost a quarter
of Indian adults do not know how to read and write. Eleven states in the country, accounting for more
than half of Indias population, have literacy levels that are below the national average. The Internet
and Mobile Association of India (IAMAI) estimates that almost 90% of the countrys population is
digitally illiterate. A recent report from GSMA Connected Women reported that Indian women also
have lower levels of digital literacy and confidence than men. For example, 38% of female
respondents were worried about making mistakes and losing money on their phone while using a new
function and 34% of females did not know how to use a mobile or use the more complex features.
There are 22 officially recognised languages in India and, according to a report by IAMAI, 45 million
users access content in their local language, equivalent to more than a third of active internet users.
Mobile operators and ecosystem players have begun to address this challenge. For example, Google
has created the Indian Language Internet Alliance, in partnership with news and media companies in
the country, to attract Hindi-speaking users to the Web. Meanwhile, Micromax is working with local
app developers to increase the number of local language apps. In recognition of the lack of digital
skills among many mobile users in the developing world, the GSMAs Connected Society programme
recently developed a training tool to assist organisations interested in addressing the problem. The
Mobile Internet Skills Training Toolkit (MISTT) has been developed for mobile operators, NGOs,
development organisations and governments that want to provide training to improve peoples basic
knowledge and understanding of the mobile internet. It provides an introduction to using the mobile
internet on an entry-level smartphone through three services: WhatsApp, YouTube and Google, with
information about safety and cost included throughout. The MISTT was developed with end-users in
Maharashtra state in India, with mobile industry partners Idea Cellular and Telenor India, the NGO
Digital Empowerment Foundation and other industry experts. It includes an accompanying How To
guide to help organisations customise training sessions for their audiences in different contexts. In
2015, as part of its mandate to provide Internet for All, Telenor India began to establish dedicated
spaces for customer engagement and education. As of June 2015, 26% of Telenor Indias customers
were active mobile data users, which it aims to increase to 50% by 2017. To do this, it is converting
sections of its 2,000 stores across the country into customer education hubs that aim to improve
customers mobile internet skills and awareness of what is available online. Nearly 300 of these have
been established to date, with 500 planned by July 2016. Customers not currently using the internet
will be invited to receive training built on the MISTT curriculum. They also receive free Internet trial
packs to familiarise themselves with the mobile internet and learn which mobile data packs best suit
their needs.

The digital divide in India is compounded by a lack of awareness about the benefits of the internet. A
recent report by GSMA Intelligence and the GSMA Digital Inclusion programme showed that many
non-users lack awareness of internet uses and available content. Consequently, they do not feel the
internet is relevant or useful to them, and associate the utility of the internet with just entertainment,
passing time and posturing.12 Creating awareness around the benefits of the internet and the
availability of useful services covering a wide range of subjects, such as agriculture, education and
healthcare, is crucial to bringing more people online. Operators are playing an active role in
addressing these challenges. For example, Uninor (now Telenor India) launched the Internet on
Wheels initiative to educate people about the benefits of the internet and increase adoption of mobile
internet in rural areas in India. A branded van will be travelling across rural areas of Uttar Pradesh,
Bihar & Jharkhand, Andhra Pradesh, Maharashtra and Gujarat to teach customers about the mobile
internet, how to access it on feature phones, how to navigate on a smartphone and how data packages
work. Telenor India has also opened more than 200 customer education hubs (Grahak Shiksha
Kendras) to train customers on mobile services. These centres will act as knowledge and awareness
centres where existing and potential customers can get information on Telenor Indias voice and
internet services. In these hubs, any query related to mobile phones can be resolved. Telenor India
developed an in-house curriculum to train the customer relationship executives, 50% of whom are
women, at the hubs. Telenor India plans to increase the number of hubs to 500 by the end of 2015.
Idea has been running various campaigns at a national level to educate people on the potential of the
mobile internet and to make it more relevant to individuals lives. This has been supplemented by
campaigns at a regional and local level, with the company providing mobile-based training on using
the internet.

In the southern state of Karnataka, Idea organised a programme called Idea Internet Santhe,
conducting events across 10 small towns and making available activated data-bundled SIM cards for
users. In another region the company launched Idea Buddy, a form of talent contest aimed at college
students to find the individuals with the highest levels of internet knowledge. A key element of the
programme was workshop sessions that explained the various aspects of the internet. The company
also targeted colleges that had a large population of students from lower income groups, as well as
female-only colleges, to address the lower uptake of mobile internet and data services in these groups.
The government in India is also playing an active role. The National Digital Literacy Mission aims to
provide ICT training to 1 million people initially one in every eligible household in selected
blocks in each state of the country. Around 90% of these will be entitled to government support for
training fees, with the rest supported by industry players and NGOs.
Mobile Connect India is a collaborative effort by the six leading operators in India (Bharti Airtel,
Aircel, Idea, Tata Teleservices, Telenor and Vodafone India). The operators account for around 85% of
the Indian market, with more than 800 million connections as of March 2016 (all of which are Mobile
Connect enabled). These operators are in the process of launching Mobile Connect across all of their
circles. Use cases are being developed by operators and service providers to address some of the
pertinent issues faced by the industry. These include helping banks complete two-factor authentication
(mandatory in India for transactions) without the need for complicated security questions or SMS;
helping customers to authenticate in-person without actually giving away personal data, including the
mobile number, for example with e-commerce home deliveries; and detecting advertising fraud.

2.2.2 Mobile delivering financial inclusion

Financial inclusion is still a significant challenge in India. According to World Bank Findex data
(2014), nearly half of the adult population in India do not have a bank account and over 90% of the
villages do not have a commercial bank branch. The absence of formal banking services is a key
reason behind the reliance on an informal cash-based economy, which is typically unsafe,
inconvenient and expensive. Mobile technology is being used in more than 89 countries across the
globe to deliver secure, convenient and affordable financial services to the unbanked. In India, mobile
technology is crucial to two key areas of the Digital India initiative: providing infrastructure as a
utility to citizens to support mobile money and mobile-enabled bank accounts making governance
and services available on-demand by making financial transactions electronic and cashless. Only
2.4% of adults in India currently have a mobile money account, compared to nearly 6% in Pakistan
and an average of 2.6% in South Asia. In the past, regulatory barriers have prevented the mobile
money industry in India from realising its full potential. However, Indian mobile operators are well
equipped to help address the challenges around financial inclusion, building on their existing
relationships with customers, their experience of managing distribution across more than 2 million
point-of-sale outlets in India, and their control over the SIM card and data channels. Recent
regulations issued by the Reserve Bank of India (RBI)13 for differentiated bank licences aim to
further financial inclusion by providing (i) small savings accounts and (ii) payments/remittance
services to the migrant labour workforce, low income households, small businesses, other unorganised
sector entities and other users, by enabling high-volume, low-value transactions in deposits and
payments/remittance services in a secured technology-driven environment. In August 2015, the RBI
granted in-principle approval to 11 applicants to set up payment banks, out of which five have
mobile operators at their core: Aditya Birla Nuvo (Idea), Airtel M Commerce Services, Reliance
Industries (Reliance Jio), Dilip Shanghvi (Telenor India) and Vodafone mPesa. The approval is valid
for a period of 18 months, during which time the applicants will have to comply with requirements
and guidelines to obtain the full licence and begin banking business. Furthermore, the government has
now prioritised financial inclusion in the country through Pradhan Mantri Jan Dhan Yojana (literally
translated as the Prime Ministers Public Wealth Scheme), which was launched in August 2014 and
saw more than 160 million savings accounts opened within a year. It is important to note here that
financial inclusion does not stop at merely opening accounts. It is also necessary to ensure that the
underserved population are able to transact in a safe and convenient manner under the scheme.

2.2.3 Digital identity

The Indian government is keen to increase the level of interaction with its citizens through the
efficient delivery of public services, the timely dissemination of relevant information, and citizens
participation in government through feedback on various public and private services. The first step in
this process is for the government to provide Indias 1.2 billion population with an official identity to
have accurate data throughout the lifetime of every individual, from birth registration and healthcare
services during childhood, through education, employment and tax services during school and
working age, and pensions and social benefits in retirement. To achieve this, the Indian government
launched the Aadhaar project, the worlds largest national identification project, in 2010 to
authenticate the identity of citizens through a unique identification number. This is stored in a
centralised database and linked to both demographic and biometric information. Nearly 800 million
identification numbers, equivalent to 70% of the population, had been issued as of June 2015.
Furthermore, more than 100 million bank accounts have been linked to Aadhaar ID numbers, enabling
the government to electronically transfer social aid to beneficiaries bank accounts, cutting down
wastage in social security schemes. The acceptance of Aadhaar as a valid form of ID by state agencies
will form the foundation for the governments plans to enable mobile banking and other digital
services by linking citizens mobile numbers to their Aadhaar numbers.
Mobile operators can play an important role in supporting the governments digital identity efforts
through solutions that leverage the high level of trust they enjoy among customers. One such solution
is the GSMA-backed authentication solution, Mobile Connect. The solution enables mobile phone
users to conveniently create and manage a universal identity that will securely and safely allow them
to access mobile and digital services such as e-commerce, banking, health and entertainment, as well
as e-government portals, via their mobile phones
Through the deployment of Mobile Connect in India, mobile operators wish to further enhance and
enable the active use and security of the countrys digital ecosystem in a way that respects individuals
personal data. In doing so, operators plan to establish a new position in the digital ecosystem that
creates a new authentication and personal data business based on providing value and building trust
with the consumer.

2.3 Innovation: mobile is changing the landscape of Indias digital

industry
Increasing mobile broadband network coverage and growing smartphone adoption are driving the
uptake and use of new applications and services on mobile phones. Social media and online
communications applications are examples of services that have grown rapidly in recent years. A
growing proportion of the Indian population now access social media sites on mobile phones, with
platforms such as Facebook, Twitter and Whatsapp proving popular. Social media sites were widely
used for political campaigning in the last general election. India is now at an inflexion point in terms
of the digital transformation of the economy, with local tech startups growing throughout the country.
The study also highlights how the Indian mobile industry is rapidly migrating to new mobile
broadband networks, services and devices and becoming a key enabler of the governments Digital
India initiative aimed at providing broadband connectivity to all.Mobile broadband networks
(3G/4G) accounted for only 11 percent of Indian mobile connections in 2014, but are expected to
make up 42 percent of the total by 2020. In a little over five years since the launch of the first
commercial 3G networks, Indian mobile operators have extended 3G network coverage to threequarters of the population.More than half a billion new smartphones connections are expected in India
between 2015 and 2020, bringing the total to 690 million, up from 149 million in 2014.

2.3.1 Mobile commerce

The online commerce market in India has seen significant growth in recent years, growing at a CAGR
of 34% over the period 20092014 to reach a total value of $16 billion in 2014. This is expected to
reach $22 billion by the end of 201514. Growth has been fuelled by rising disposable income levels as
well as increasing internet access. Mobile commerce has changed the face of the Indian online
commerce industry in the last two years. Mobile accounted for more than 40% of total e-commerce
sales in 2014, led by travel and retail services, compared to less than 20% in the UK and the US15.
Developing a mobile (sometimes mobile-only) strategy has been top of the agenda for many of the
leading e-commerce players in the country over the last two to three years.
Mobile commerce is worth US$230 billion, with Asia representing almost half of the market, and has
been forecast to reach US$700 billion in 2017. According to BI Intelligence in January 2013, 29% of
mobile users have now made a purchase with their phones. Walmart estimated that 40% of all visits
to their internet shopping site in December 2012 was from a mobile device. Bank of America predicts
$67.1 billion in purchases will be made from mobile devices by European and U.S. shoppers in 2015.
Mobile retailers in UK alone are expected to increase revenues up to 31% in FY 201314.

2.3.2 Internet of Things

The Internet of Things (IoT) describes the coordination of multiple machines, devices and
applications connected to the internet by multiple networks. Mobile is expected to be a key enabling
technology for IoT, acting as an aggregator or hub to connect a range of devices and offering widearea connectivity. Forecasts from Machina suggest that the total number of connected IoT devices in
India, using a range of different technologies, could reach more than 1 billion by 2020. This is
expected to be led by the utilities, automotive, transport & logistics and financial services sectors.
There is also likely to be an important role in improving access to government services. According to
a study by the Department of Electronics and Information Technology (DeitY), the value of the IoT
industry in India could reach $15 billion by 2020, equivalent to 56% of the overall global IoT
industry.16 India is the third biggest market in Asia Pacific in terms of machine-to-machine (M2M)
connections. The total number of cellular M2M connections in India will increase at a CAGR of 40%
for the period 20142020.
Mobile Connect is the global, mobile industry-led, single log-in solution that delivers secure
consumer access to websites and apps. It uses the consumers unique mobile number to verify and
grant online access anywhere they see the Mobile Connect logo. Mobile Connect can play a
significant role in driving growth within digital economies, and is experiencing early traction within
highly populated developing regions, particularly those in South and South-East Asia. 2.2.4Mobile
Connect driving economic growth Mobile Connect provides clear advantages to consumers, such as
eliminating the ever-increasing number of passwords needed to securely maintain online identities,
and giving consumers control over their data, helping them make online interactions with confidence.
Mobile Connect can reduce the risk of fraud for service providers when users access their services,
and can reduce the number of abandoned online transactions. The Mobile Connect solution is already
available to more than 2.8 billion consumers globally, including all the major markets in Asia Pacific.
While initially focused on secure and convenient log-in to digital services, Mobile Connect is
evolving to deliver secure authorisation of digital transactions and to add context and attributes about
the user and the transaction to increase convenience, trust and security for users and online service
providers, while respecting users privacy.

2.3.3 Improving access to basic services through innovative mobile applications

Mobile technology can play an important role in improving access to basic services that can empower
individuals living in hard-to-reach communities across India. The majority of Indias population lives
in these areas, but in many areas the lack of basic infrastructure excludes them from several public
services that can generally improve their well being. With a wide range of pressures and demands on
government budgets, mobile technology has emerged as a vital tool in providing services to people in
currently underserved areas. The range, content and specification of mobile-enabled services have
expanded considerably in the last few years.

Agriculture: Reuters Market Light (myRML)

myRML uses mobile technology to help Indian farmers make informed decisions.

It provides easy access to personalized and unbiased agriculture insights, and

the latest updates on market prices, weather, news, and crop advice based on
their location and in their preferred language. The service is available in nine
languages: Hindi, Bengali, Gujarati, Kannada, Marathi, Punjabi, Tamil, Telugu
and English.

Utilities: NextDrop
NextDrop provides water supply alerts to residents in the twin towns of Hubli-Dharwad in Bangalore,
using a simple Android app. With the supportof the Bangalore Water Supply and Sewerage Board and
GSMA Mobile for Development Utilities funding, this system has been deployed across 40% of
Bangalore. NextDrop is already providing more than 75,000 people in Hubli-Dharwad with timely
and reliable information about their water supply.

Women safety: FightBack

The app FightBack enables users to quickly send an alert in an emergency. By pressing a simple
button (and then confirming), SOS SMS and emails, GPS coordinates, and location maps are
automatically sent to preselected contacts. The app has had more than 100,000 downloads and is now
available in 22 Indian states, providing a sense of security for women and other vulnerable people.

Encouraging women to use mobile: Project Sampark

Uninor (now Telenor India) launched Project Sampark in August 2014 with a pilot phase covering up
to 370,000 people in the Aligarh district. It aims to address the barriers that discourage women from
accessing mobile phone services. The project includes marketing and awareness campaigns, and using
women promoters to sell mobile services. The Bandhan pack includes two SIM cards. Recharging
either SIM adds credit to the other, so that when a male member of the family tops up this can also
benefit a female member. Telenor India is now evaluating rollout of the project to other circles with
similar challenges.
Entrepreneurship and work: LaborVoices
LaborVoices helps employers identify and solve problems in their supply chains before they become
critical by enabling them to instantly poll workers on their safety and working conditions through
their mobile phones. The users (workers) can call into LaborVoices SmartLine and answer a series of
questions about issues that interest the supplier, such as wages, health, safety, and child labour .
Users can call into thesystem 24x7 free of charge and leave feedback using their mobile phone
keypad. This data can be translated into meaningful insights for the employers. LaborVoices is active
in several countries in the region, including Bangladesh and China.

3.1 The economic contribution of the mobile ecosystem in 2014

The direct economic contribution to GDP of mobile network operators and the mobile ecosystem is
calculated as the value added generated by companies operating in the mobile ecosystem in India. In
2014, the total value added generated by the mobile ecosystem was INR250,000 crore (2% of GDP),
with the greatest economic contribution among all mobile ecosystem players coming from mobile
operators, with a total direct impact of INR126,000 crore, or around 1% of GDP.

Beyond mobile network operators, India has a solid and vibrant mobile ecosystem, with all the four
ecosystem industries considered in our analysis generating significant economic activity in 2014:
the fast-growing mobile content and apps servicessector generated nearly INR22,000 crore in 2014
the largely established and consolidated Indian mobile towers and infrastructure sector generated
just under INR30,000 crore
the renascent Indian handset manufacturing sector generated INR36,000 crore
the still largely informal mobile retail sector generated approximately INR37,000 crore in value
added.
As mobile operators and the ecosystem purchase inputs and services from their providers in the
supply chain, a multiplier effect on other Indian businesses is produced, generating sales and
economic value added in other sectors and industries. For example, distribution and transport
companies draw part of their revenues from supporting the operations of tower companies when
upgrading and expanding their mobile internet networks. The same effect can
be observed in many other sectors of the economy,including energy, retail and professional services
such as finance or insurance. We conservatively estimate that a value added of around INR50,000
crore (0.4% of GDP) was generated through these indirect impacts in
India in 2014. Finally, mobile technology has transformed the way economic activity is carried out in
many sectors of the economy, easing ways of doing business and allowing more efficient ways to
communicate and access information. The productivity impacts brought about by the widespread
adoption and use of mobile technology by individuals, businesses and governments generated
approximately INR4.7 lakh crore in 2014, an estimated 3.7% of Indias GDP. Overall, considering
direct, indirect and productivity impacts, in 2014 the mobile industry supported a total contribution of
INR7.7 lakh crore to the Indian economy in value added terms, equivalent to 6.1% of Indias total
GDP.

3.2 Employment contribution of the mobile industry

In 2015 mobile operators and the ecosystem provided direct employment to approximately 2.2
million people in India. We estimate that approximately 1.9 million people were employed in the
informal sector through the retail and distribution of mobile technology, primarily mobile handsets.
Formal employment in the mobile ecosystem reached approximately 300,000 in 2014, with the largest
employment numbers in the content, applications and services sector, with

approximately 150,000 jobs. A large number of jobs in this sector are on a part-time or self-employed
basis. Indian mobile network operators also employ a significant amount of people, estimated at
67,000 in 2014. Handset manufacturers and the formal retail sector (large retailers, small chains and
increasingly also general retailers) generated slightly lower numbers of jobs (46,000 and 33,000 jobs
respectively), although the figures in both cases could increase in the next few years if emerging
trends continue. A number of mobile manufacturers have reported plans to open or strengthen their
presence in India, while the formal retail sector is also growing and expanding faster than
traditional retailing.
Further to the employment that is sustained within the ecosystem, additional jobs were also indirectly
supported in other industries, as the ecosystem generated demand and jobs in other sectors that
benefit from the activity of the mobile industry, in particular in the direct supply chain. We estimate
that in 2014 around 1.9 million jobs were indirectly supported in this way, bringing the total impact
(both direct and indirect) of the mobile industry to around 4 million jobs in 2014..

3.3 Public funding contribution in 2014

The mobile ecosystem also makes a highly significant contribution to the funding of the Indian public
sector, with approximately INR1.1 lakh crore in 2014. This contribution comprised INR57,000 crore
in general taxation, INR31,000 crore in mobile-specific taxation, and payments of INR19,040 crore
for the licencing of spectrum acquired through the 900 MHz and 1800 MHz

auctions in 2014.
In 2014 mobile operators and the ecosystem provided direct employment to 6.5 million people across
the region. The largest employment contribution came from the content, applications and services
sector, with approximately 2.4 million jobs, although a high proportion of jobs in this sector are parttime or on a self-employed basis. Further to the employment that is sustained within the ecosystem,
additional jobs were also indirectly supported in other industries, as the economic activity in the
ecosystem generated demand and jobs in other sectors that benefit from the activity of the mobile
industry, in particular in the direct supply chain. We estimate that in 2014 over 6 million jobs were
indirectly supported in this way, bringing the total impact of the mobile industry to around 12.5
million jobs in 2014.
The mobile ecosystem also makes a very significant contribution to the funding of public sector
activity in the region through general taxation. For most countries this includes value added tax,
corporation tax, and income tax and social security from mobile ecosystem employees. The sector
made a total contribution to the global public finances of governments across the region of over
US$130 billion in 2014.

3.4 Outlook and trends for 20152020

In the period to 2020, there will be growth across all of the key economic impact
Measures considered for the mobile industry in this report: economic value added,
employment supported and the contribution to the funding of the public sector.

In value added terms, a total economic value of INR14 lakh crore will be generated by 2020 in the
form of salaries, profits and tax payments, almost double the figure for 2014. This increased
contribution reflects the fact that the mobile ecosystem will experience faster growth than the rest of
the economy. As a result, the total contribution of mobile technology as a percentage of GDP is
forecast to increase from 6.1% in 2014 to 8.2% in 2020. There could be upside to these forecasts if
both the government and regulators adopt some of the enablers outlined in this report, and if the key
ambitions of the Digital India programme are realised. Most of this growth will be driven by the boost
to business productivity and economic output resulting from previously unconnected citizens
becoming first time internet users, with virtually all of this additional connectivity provided through
mobile networks. Internet connectivity is directly linked to greater productivity and economic growth,
and the large increase in the number of internet users will be the key driver of the transformation in
the productivity of the Indian economy over this period. There may be upside to these forecasts if a
more supportive regulatory environment is put in place and this helps realise the governments Digital
India initiative.
In the period to 2020 the economic contribution from the mobile ecosystem and enabled by the use of
mobile services will continue to grow. A total economic value of over US$1.8 trillion will have been
generated by the mobile industry in 2020 in the form of salaries, profits and tax payments, up from a
figure of US$1.1 trillion in 2014. The value added generated by mobile technologies in the region will
experience faster growth than the rest of the economy, despite relatively high levels of overall
economic growth. The total contribution of mobile technology as a proportion of GDP will also
increase going forward. This growth will be driven by both demand and supply side effects. On the
demand side, mobile technologies will connect previously unconnected populations to the internet and
enable a more efficient use of resources in those economies. Supply-side effects will also make a
significant contribution, as the number of subscribers grows and new value added services are brought
to market, generating revenue and value added growth in the ecosystem.

As a percentage of GDP, the contribution of the mobile industry will also increase, from 4.7% in 2014
to 5.9% in 2020. This strong growth is higher than the growth we expect to see globally, which puts
Asia Pacific among the regions in the world where the impacts from mobile technologies will be most
transformative from a socioeconomic perspective during this period. Growth in the period to 2020 is
expected to be particularly strong in those countries with lower income levels such as Bangladesh,

and those with relatively low levels of mobile internet penetration such as Myanmar. There is less
growth potential through productivity improvements where market penetration is already high, such
as Japan, Australia and South Korea, which are also amongst the countries with highest income per
capita in the region. There is some potential upside to these projections in these more developed
markets if the adoption of new services and the roll-out of LTE networks further enhances efficiencies
and enables lower costs for businesses during this period.
The total number of jobs both directly and indirectly generated by the ecosystem will also grow
significantly in the period to 2020. The number of jobs directly and indirectly generated by the
industry in Asia Pacific will increase to nearly 8 million and 7 million respectively by 2020. At the
same time, the public funding contribution of the mobile ecosystem (excluding spectrum and other
regulatory fees) will reach over $150 billion by 2020 in real terms if tax rates remain at current levels,
up from $130 billion in 2014.

4. Regulatory enablers for Digital India

Indias policy-makers and mobile operators share a common agenda. The governments Digital India
programme, which is aiming to transform the country into a digitally empowered society and
knowledge economy, is closely aligned with the goals of the countrys mobile industry. Creating a
Digital India depends on giving both entrepreneurs and employees high-quality connectivity. Indias
mobile operators are striving to extend broadband to many more people and communities. Faced with
challenging economic and terrain, mobile operators need a regulatory environment that attracts
investors and encourages innovation.
There are a number of key steps that policy-makers can take to create a forward-looking, flexible and
fair regulatory and licensing framework:
Make sufficient internationally harmonised spectrum available on reasonable terms.
Remove barriers to network infrastructure deployments.
Adjust taxes and licence fees to increase the affordability of mobile broadband services and the
ability of operators to invest in their networks.
Level the playing field between Internet players and telecoms operators.

4.1 The fundamental importance of spectrum

To maximise the economic and social benefits for Indias citizens, spectrum needs to be in the hands
of those able to use it most productively. To date, India has allocated significantly less spectrum per

subscriber than most other countries, either developed or developing, to mobile services. With a
modest ,allocation of spectrum split between 12 licensees, it is difficult for individual mobile
operators to meet peak demand for traffic on their networks.
A telecom company that wishes to offer services in any of the 22 telecom circles in India must
purchase a Unified Access Services (UAS) license to operate that circle. Licences are awarded by
auctions. The UAS, introduced in November 2003, is valid for a period of 20 years, which can be
extended by an additional 10 years once per licence per circle ]Initially, a mobile network operator
that was awarded a licence to operate in any of the 22 telecom circles in India was allocated
frequencies in that circle for a fixed time period. After the expiry of the licence, the company would
have to bid to renew the licence. A new telecom policy announced by the government in 2011,
delinked spectrum from licences. As a result, when an operator renews its licence it must also pay
separately for spectrum.
The first telecom spectrum auction in India was held in 1994. Auctions were held again in 1997,
2000, and 2001. Spectrum in the 900MHz band was auctioned in all these years except 2001, while
1800 MHz band spectrum was auctioned for the first time in 2001.Following the 2001 auction, the
government abandoned the practice of auctions in favour of an administrative allocation model. Under
this model, the government would select companies that it deemed were best equipped to develop
India's telecom infrastructure. The final allocation of 900 MHz took place in 2004, through the new
model. This policy resulted in spectrum being allocated at far lower prices than had been done
through auctions. For example, Reliance had paid 12.25 crore and 58.49 crore in 1995 for 4.4MHz
spectrum in West Bengal and Orissa respectively. In 2004, Airtel was allocated the same amount of
spectrum in the same circles for 1 crore and 4.4 crore respectively.
India, fast increasing use of mobile broadband, applications, content and services means mobile
operators are going to need to be able to employ significantly more spectrum than they do today. If
sufficient spectrum is not available, mobile networks will become increasingly congested, frustrating
consumers and curbing companies productivity.

4.1.1 Licensing more internationally harmonised Spectrum

Indias mobile operators still have access to only a fraction of the spectrum that has been identified

globally for mobile services. Although the government is set to provide additional spectrum before the
end of the current financial year, more spectrum will be needed in the near future. The amount of
spectrum required in each national market varies depending on levels of data demand and
national priorities, but the GSMAs research suggests that, on average, a total of 16001800 MHz
should be identified for mobile services. Given the density of major cities in India, and its technologysavvy population, the GSMA believes the spectrum available for mobile services in India needs to be
at the high end of this range. Unlicensed spectrum is not an adequate substitute, as it creates an
uneven playing field and can quickly become congested, leading to interference between services.
By 2020 more than half a billion mobile connections in India will be running on mobile broadband
networks.Achieving this figure, and ensuring further growth in future, will depend on mobile
operators gaining access to additional spectrum, especially in the 2100 MHz band. The government
needs to take urgent steps to migrate current users, mainly defence, from the 2100 MHz band to make
the remaining spectrum available for mobile communications in line with the internationally
harmonised band plan. It is encouraging that the government has indicated its intention to make more
spectrum in this band available. India also needs to harmonise the 1800 MHz band, which is highly
fragmented.
The next step is to prepare a clear roadmap for the release of the 700 MHz band for mobile services,
which is already being deployed in some countries. This low-frequency spectrum, structured in line
with the Asia-Pacific Telecommunity (APT) band plan, can enable cost-effective coverage of large
geographic areas, so will play an important role in extending mobile broadband coverage. Contrary to
most markets, in India this band is not occupied by broadcasting and can therefore be made available
for mobile usage. This is an advantage that India should capitalise on to ensure the full frequency (2 x
45 MHz) is licensed to expand mobile coverage across the country. To increase digital inclusion,
Indias policy-makers should also consider offering subsidies, such as a reduction in licensee fees, to
operators that achieve a specific coverage threshold. A key constraint for operators is that reserve
prices in India have historically been set on the high side. As a general rule, new spectrum needs to be
licensed via a well-designed auction process with a reasonable reserve price. It is particularly
important to make available sufficient spectrum so that the auction realises a true market price, rather
than an excessive price driven by scarcity. The more mobile operators pay to license spectrum, the
less money they have available to build out networks. As the digital economy becomes increasingly
important to Indias future prosperity, the government needs to prioritise the rollout of broadband
over plugging short-term gaps in the fiscal deficit.

4.1.2 Preparing for the next decade

Looking further out, India will also need to make more internationally harmonised
spectrum available to fulfil its Digital India ambitions. Given the time it can take for
spectrum to be allocated, cleared and then licensed,, the World Radiocommunication
Conference 2015 (WRC-15) plays a critical role in determining whether mobile broadband
services can continue to drive socioeconomic growth over the next decade. As a major
player on the global stage, India will be an influential voice at WRC-15, which is charged
with identifying additional spectrum for mobile broadband by 2020 and
beyond.
The GSMA is proposing that WRC-15 identify four frequency ranges to mobile broadband:

Sub-700 MHz UHF (470694 MHz): In countries with a large geographic area
such as India, the
spectrum below 700 MHz will be important for providing extensive and affordable mobile
broadband coverage in rural areas beyond 2020. This band is already allocated to mobile
services in Asia-Pacific. Licensing these bands for mobile services, thereby preventing
interference and wastingvaluable frequencies, is the most efficient way to harness this
valuable spectrum for the greater good.
L-band (13501400 MHz and 14271518 MHz): This band is capable of delivering
additional capacity and coverage over relatively large areas, including inside buildings. It
is the most supported band across all continents, with some European countries already
auctioning part of the band in 2015. This band has the potentially to be harmonised
globally, generating major economies of scale for the mobile industry and its customers.
2.72.9 GHz: This band, which is underutilised, particularly in South Asia, would
provide important
extra mobile capacity, and its proximity to 2.6 GHz will facilitate the fast deployment of
extra capacity to the existing cell sites.
C-band (3.43.8 GHz and 3.84.2 GHz): The size of this band offers a unique
opportunity to identify
a significant portion to deliver very fast mobile broadband services in Indias dense urban
areas.A WRC-15 decision to allocate these bands for mobile services is essential for
subsequent international harmonization that will lower the cost of equipment,enable
roaming and reduce international interference. At the same time, national
administrations will have the flexibility to release the amount they choose to meet
national demand when necessary. As the mobile ecosystem needs time to develop
appropriate devices and network equipment, it is important for the government to
publish a spectrum roadmap that provides clarity for the industry and investors. Indias
device manufacturing industry will also benefit from a clear spectrum roadmap,
bolstering the governments Make in India initiative and strengthening the countrys
manufacturing base.

4.1.3 Liberalising the spectrum market

One of the key factors holding back uptake and usage of mobile broadband in India is spectrum
fragmentation. The 1800 MHz band, for example, is highly fragmented. Some operators have 5 MHz
blocks of spectrum, which cannot be effectively used for LTE service. The introduction of a welldesigned spectrum trading and sharing framework would ensure that the limited spectrum available
for mobile services is used to its full potential to the benefit of Indias consumers and businesses.
Through spectrum trading and less restrictive spectrum caps, mobile operators could assemble the
contiguous blocks of spectrum they need to provide mobile broadband services efficiently and
effectively. As Indias regulators have noted, spectrum trading would also provide a mechanism
through which a telecoms company could exit the sector, while enabling more specific and targeted
reallocations of spectrum than can be reached through mergers and acquisitions.
Otherwise, some key blocks of spectrum will continue to be underutilised.
The government of India has approved both Spectrum Sharing and Spectrum Trading guidelines
which could help intensify the use of the mobile band frequency resources to the benefit of society
and consumers. However, the government should avoid imposing counterproductive licensing fees,
while rules should be sufficiently flexible to enable mobile operators to efficiently match supply to
demand. If India can fully liberalise its spectrum market, there will be major economic benefits,
which will ultimately increase and broaden the countrys tax base.

4.2 Building the networks India needs

Several obstacles are slowing the deployment of broadband. These obstacles include limited
availability of power, the rules governing electromagnetic fields (EMFs) and the patchwork of local
regulations relating to rights of way for building infrastructure. For Indias consumers, this means
gaps in coverage, dropped calls and lower data rates.
Worldwide, many governments have introduced initiatives to make it easier to deploy antenna sites.
By way of example, in January 2015 the US FCC adopted the Acceleration of Broadband Deployment
Report and Order. This aims to streamline the construction of antenna sites in many ways including
providing definitions for co-locations and modifications that must be approved by states and
municipalities. In the UK, the government is consulting on measures to improve coverage in rural
areas, including allowing taller structures. The federal and state governments in Australia will invest
about AUD190 million in partnership with industry to deliver the first phase of the Mobile Black Spot
programme. This programme will deliver new handheld coverage to 68,600 square kilometres and
new external antenna coverage to over 150,000 square kilometres. Over 5,700 kilometres of major
transport routes will receive new handheld or external antenna coverage.

4.2.1 Addressing barriers to network deployments

In an increasingly digital economy, the mobile industry needs standardised guidelines, consistently

enforced throughout the country, for the deployment of base stations and fibre.The first key step is to
introduce explicit and consistent planning approval processes for mobile base stations across India,
thereby ensuring networks can be deployed without lengthy delays. The government should consider
introducing mechanisms to reduce bureaucratic inefficiencies, including one-stop shopapprovals,
fixed decision periods and simplified procedures for co-locations and modifications to existing sites.
The costs of obtaining approval certificates from municipalities have reportedly increased by 500% in
recent years and this should be reviewed.
India is now taking much-needed steps to simplify its rights-of-way policies to enable faster
deployment of the cables required to connect base stations to the telecoms network and ultimately the
Internet. Again,the procedures and charges for rights of way, which can be very expensive and timeconsuming, need to be streamlined and standardised across India. The government also needs to do
more to ensure telecoms networks have access to a reliable power supply, particularly in rural areas, at
preferential rates that reflect the fundamental role of connectivity in Indias economy and telecoms
infrastructure sector status. The Department of Telecommunications guidelines for state governments
on the installation of masts stress that electricity should be provided as a priority, but in reality this
often does not happen. The decision of the Kerala State to allow mobile network infrastructure to be
established on government land and buildings demonstrates how state governments can reduce the
barriers to network deployment

4.2.2 Allaying health concerns

Highly restrictive regulations on EMF exposure also constitute a major barrier to network
deployments. GSMA analysis with data from Telecom Italia (Italy) and P4/Play (Poland) found that
restrictive EMF limits in those two countries result in 620 million in additional capital expenditure
and 127 million in additional operating costs. As Indias Minister of Communications and
Information
Technology Ravi Shankar Prasad has recognised, there is a need for clear and objective information
about the health effects of mobile radiation. India would benefit from adopting global radiofrequency
exposure standards, which are designed to be protective of all persons. In 2012 India reduced
exposure limits for base stations to one tenth of international guidelines.
Medical experts have debunked the view that India needs special restrictions on EMF exposure
beyond those recommended by the World Health Organization. Radiation from mobiles and mobile
towers pose no threat to health or cause cancer as it is commonly believed, Delhi Medical
Association president Anil Agarwal said at a press conference held on 27 September 2014 at the India
Habitat Centre in New Delhi. There are no empirical findings to establish that mobile tower radiation
causes cancer or any such diseases. The radiation emitted is just too weak to be harmful. The current
EMF research program being coordinated by the Indian Science and Engineering Research Board
would benefit from greater cooperation with international researchers who could share their expertise
on the specific methods needed for high-quality EMF studies. Earlier in 2014 a committee set up by
order of the High Court of Allahabad, Lucknow Bench, to look into EMF radiation concerns found
there was no conclusive evidence of the dangers from mobile phone towers andthat greater efforts
should be made to reduce fears caused by misinformation.

4.2.3 Making services more affordable

Although the countrys mobile industry is offering some of the lowest tariffs in the world, the industry
and its customers pay a relatively high level of taxes and fees. In India, consumer taxes are 23.3% of
the total cost of mobile ownership, while mobile-specific taxes account for 10.3% of the total cost of
mobile ownership. As affordable devices and services are crucial to delivering the Digital India
programme, the government needs to consider how to phase out sector-specific taxes and fees that
increase prices for consumers and weaken the business case for deploying broadband infrastructure.
In general, the revenue raised through taxation on digital services and devices is likely to be less than
the broader economic returns resulting from greater adoption and usage. Excessive taxation limits the
positive impact of mobile broadband on economic and social development, employment, productivity
and the lives of citizens. For example, spectrum usage charges are superfluous and harmful when the
value of spectrum is already being more than captured by the auction mechanism.
The government should also review the universal service fund (USF) mechanism to determine
whether it is effectively supporting the provision of broadband. Research by the GSMA has found
that many universal service funds set up to support the rollout of broadband actually have the opposite
effect, as they typically levy fees on the telecoms sector and damage the business case for investment
in new infrastructure. Through levies on operators, Indias USF has already accumulated significant
funds (with a balance of over INR40,000 crore as of September 2015). Although government agencies
are now using some of these funds to deploy a fibre-optic network, the money could be more
efficiently and effectively used to provide financial incentives to telecoms operators to expand
coverage. India has one of the worlds highest USF levies at 5% of operators revenues compared to,
for example, 1% in Brazil and 2% in Colombia. Given the large funds accumulated to date, the rate of
the revenue-based charges should ideally be reduced.

4.3
Ensuring a level playing field
Indias licensing and regulatory framework was designed at a time when the Internet was just
emerging, there were no smartphones and hardly any of the new online communication service
platforms. This framework needs to be adapted for a Digital Age in which many industries and sectors
are now overlapping and converging. To provide clarity for consumers and enable fair competition,
governments around the world need to pursue regulatory neutrality, whereby the same services are
governed by the same rules. India needs to modernise its regulatory framework to treat equivalent
services in the same way, providing the same level of protection for consumers and not
disadvantaging a particular type of provider.

4.3.1
The impact of online communications services
Indias licensing and regulatory framework was designed at a time when the Internet was just
emerging, there were no smartphones and hardly any of the new online communication service
platforms. This framework needs to be adapted for a Digital Age in which many industries and sectors
are now overlapping and converging. To provide clarity for consumers and enable fair competition,
governments around the world need to pursue regulatory neutrality, whereby the same services are
governed by the same rules. India needs to modernise its regulatory framework to treat equivalent
services in the same way, providing the same level of protection for consumers and not
disadvantaging a particular type of provider. The widespread deployment of mobile broadband
networks is enabling online communications services to provide voice calls, messaging, content and
otherservices in competition with mobile operators. Several of these services have become major
players in the Indian market, and have begun to erode the voice and messaging revenues that mobile
operators rely on to support and facilitate the rollout and expansion of broadband services. For
example, India has nearly 100 million WhatsApp users, more than a tenth of the global user base. In
the absence of a fair regulatory and commercial solution, particularly for online communications
services, Indias telecoms networks will not attract sufficient investment and this could delay realising
the vision of the Digital India programme. Competition from online communications services has led
to a significant decline in revenue for telecoms operators. The operators are, at the same time,
investing heavily in networks and the acquisition of spectrum, while paying licence fees and spectrum
usage charges, to meet the escalating demand for connectivity. Online communication services are not
subject to the same level of costs of doing business. There is also a significant imbalance in the
regulatory requirements that apply to telecoms operators and new online communications services.
These include record keeping and interconnection, adherence to quality of service, security
safeguards, connectivity to emergency services, transparency, lawful interception, privacy and
other requirements. These regulatory obligations apply to telecoms operators, but not to the new
entrants providing similar services. In light of these major disparities, India needs to modernise its
regulatory framework so that no single entity or type of entity is at a disadvantage. A single,
consistently applied framework covering all competitors, regardless of the technology they use
or the type of provider, should govern Indias digital service providers.

4.3.2 Net neutrality getting the balance right

A key factor in determining whether India can fulfil its digital ambitions will be its approach to net
neutrality the subject of an ongoing government consultation. The concept of net neutrality means
different things to different stakeholders. For Indias mobile operators, net neutrality refers to the
principle that the Internet should be an open platform for freedom of expression, innovation and
socio-economic development. In this context, regulators primary objective should be to maintain an
open Internet in which service diversity, competition and consumer choice are paramount.
As of August 2015, there were no laws governing net neutrality in India, which would require that
all Internet users be treated equally, without discriminating or charging differentially by user, content,
site, platform, application, type of attached equipment, or mode of communication. There have
already been a few violations of net neutrality principles by some Indian service providers. The
government has once again called in for comments and suggestions regarding net neutrality as of 14
August, and has given the people one day to post their views on the mygov forum. After this, the final
decision regarding the debate will be made.
The debate on network neutrality in India gathered public attention after Airtel, a mobile telephony
service provider in India, announced in December 2014 additional charges for making voice calls
(VoIP) from its network using apps like WhatsApp, Skype, etc.

4.3.3 Traffic management is essential

To deliver the breadth and quality of services customers want, mobile operators need to be able
to manage their networks efficiently. In practice, that means different types of traffic have to be
treated
differently. It is unrealistic and counterproductive to treat real-time services such as video and voice
calls in the same way as delay-tolerant services such as email and messaging. If every data packet
waits in the same queue, regardless of the service requirements, the consumer experience will suffer
as calls will drop and video will buffer. Traffic management can also improve the enduser experience
in other ways. For example, mobile operators can optimise video services by compressing data,
adapting content for mobile screens, while reducing the cost to the consumer. In India, where
spectrum is scarce and networks are congested, video compression is a key tool for mobile operators.
There are many other reasons why some data traffic needs to be managed. These include blocking
illegal,content, meeting security safeguards, protection of minors and prevention of spam. Traffic
management may also be used to route calls to emergency services, take appropriate action when a
customer exceeds their contractual data-usage allowance, or to offer charging models that allow
customers to choose the service or application they want. Traffic management may also be used to
provide higher quality services to organisations that need highly reliable or low latency connectivity.
As healthcare providers, automotive manufacturers, local governments, transport providers and many
other companies increasingly harness connectivity to serve their customers better, mobile operators
need to ensure they can deliver the requisite quality of service. Regulators also need to bear in mind
that traffic management is an evolving discipline, characterised by continual innovation to efficiently
utilise network capacity and ensure quality for the end user. Mobile operators complement their
investment in network capacity with active network management. Active network management does
not, of course, mean that the Internet is distorted or that customers are not able to enjoy content,
services and applications of their choice. Traffic management does not imply blocking a specific
content or application provider on the network. It simply means that services work better and
networks run more efficiently. Regulations that prohibit traffic management, or prescribe a limited set
of permissible cases, simply arent future-proof and could harm innovation, investments and the
quality of experience for users.

4.3.4 The case for commercial flexibility

An overly congested or degraded network is not in the interests of operators or end users. The internet
is typically a two-sided market and operators should have the flexibility to offer commercial
propositions to both sides, namely end-users and third-party content and application providers.
Different pricing models associated with different service attributes should not be viewed as harmful
to consumers. The availability of a variety of service packages that combine different prices, quality
and bundled content increases the choice available to consumers and allows them to choose the
package that best suits them. The freedom to agree commercial arrangements with other content
and application providers, through managed services and zero-rated practices, encourages the
development of innovative services and sustainable business models.
Such commercial models are common business practices in other industries, promoting competition
and generally enhancing economic efficiency and societal welfare. For example, the zero-rating of
specific services, where data usage related to a specific service (e.g. video streaming) does not count
against an end-users data consumption allowance or result in metered data consumption charges, can
encourage consumers to use the Internet and to try new services without worrying about data
consumption costs. Zero rating and sponsored data models are aligned with the principle of the open
Internet and benefit consumers and competition.

4.3.5 Competition is proving effective

.
The competitive mobile market in India is delivering choice, innovation and value-for-money for
consumers. A competitive market, rather than ex-ante regulation, is the best way to ensure that the
internet remains a platform for growth and innovation. At this stage, when the technologies, services
and commercial models of the internet ecosystem are evolving, the best way to deal with the debate
on net neutrality in India is to let the market find balanced solutions to meet consumer expectations.
Operators should continue to have the flexibility to offer a variety of tariffs to consumers and agree
commercial arrangements with content and application providers. The existing legal and regulatory
framework in India provides authorities with adequate safeguards to address potential concerns that
may arise.

Encouraging diversity and entrepreneurialism

To ensure their countries are competitive in this fastgrowing new sector, governments across Asia
Pacific need to encourage small and medium businesses, as well as large companies, to participate in
the technological and disruptive innovation arising from the spread of wireless connectivity. With a
diverse range of players developing IoT applications using a wide array of technologies, governments
and regulators should also ensure that their policy frameworks treat equivalent services and
technologies in the same way. As excessive or technology-biased regulation could stifle innovation,
raise costs, limit investment and harm consumer welfare, regulators should rely primarily on
competition. Both technology and service neutrality are vital to allow competitive forces to meet the
demands of the market in the most efficient way possible. In particular, privacy and data protection
regulations should apply consistently across all service providers regardless of the technologies they
employ. At the same time, IoT pioneers need a high level of regulatory clarity and legal certainty.
Commercial risks should not be compounded by regulatory risks that could deter investment. As
many IoT applications will use the data captured by sensors to create tailored propositions and
services, it is crucial that the privacy and data protection regulations are clear and consistent across
industry verticals and regulatory jurisdictions. Many IoT applications will cut across multiple industry
sectors, fusing telecommunications with healthcare, education, utilities, transportation and many other
industries. Regulators need to ensure they are not subject to confusing and contradictory rules.
Regulators in each vertical sector of the economy also need to be alert to the immense possibilities
and potential opened up by digital technologies. As awareness of these opportunities grows, some
Asian governments are adapting their sectorspecific regulations. In South Korea, for example, the
government has passed a bill that allows doctors to remotely diagnose and treat patients with certain
conditions, such as hypertension, diabetes and mental disorders, via a telecoms connection.
Previously, medical practice laws in the country had only permitted consultations when the doctor is
able to examine the patient in-person. The new regulations should reduce the time it takes for patients
to get a consultation, while lowering the cost of healthcare provision.

Expanding financial inclusion through mobile money and encouraging

digital commerce
Mobile handsets and services are now at the heart of digital commerce, enabling people to easily
complete a range of financial transactions including money transfers, making payments, redeeming
coupons, collecting loyalty points and verifying tickets. In markets where regulation allows,
individuals now use mobile phones to transfer money to each other, saving themselves time and
travel, while eliminating the security risks associated with cash. Governments and societies also
benefit - wider financial inclusion contributes to economic growth, boosts tax receipts, provides
consumer protection, and reinforces the countrys financial system by lowering the risks associated
with the informal economy and overreliance on cash. Mobile money also reduces the risk of money
laundering and terrorist financing, as electronic transactions can be monitored and traced more easily
than cash. Mobile money services can thrive in a regulatory framework that encourages innovation
and allows a new class of financial services providers to deliver digital payment and transfer
services39. Mobile operators, in particular, can use their existing distribution networks to deploy
sustainable mobile money services that could extend the reach of the formal financial sector. An open
and level playing field, in which both banks and non-bank providers can offer mobile money services,
should extend financial inclusion. To mitigate the risks, regulators can impose requirements that
safeguard funds entering the system and ensure customers can cash out electronic value on demand.
For example, mobile money providers could be required to maintain pooled ring-fenced accounts held
in banks. This model has already been implemented successfully in some Asian markets. The Central
Bank of Sri Lanka, for example, has awarded mobile operator Dialog Axiata a license to operate as a
payment services provider. In Sri Lanka, in compliance with the regulatory requirements, e-money
accounts are updated in real time, and any transaction processed by Dialogs eZ Cash service is fully
backed by pooled accounts held in a commercial bank. The equivalent of the e-money in circulation is
held by Hatton National Bank, which acts as a custodial bank for eZ Cash.

Conclusion
In summary, governments have a major role to play in the development of a digital society, both in
terms of creating a supportive environment for innovation and investment, and by harnessing digital
channels to provide effective and efficient public services.

Delivering digital government

As public services touch all individuals and businesses within a country, the digitisation of these
services can act as a catalyst for the uptake and usage of digital services by citizens across different
demographics and income levels. The first step towards the digitisation of public services is to ensure
the underlying infrastructure is in place. The GSMAs new Building Digital Societies in Asia report
recommends that governments start by formulating a national broadband plan to achieve universal
access and affordability of broadband connectivity. This plan should be complemented by a clear
digitisation strategy, outlining the key timelines and targets, as well as the roles of different
stakeholders within the digital ecosystem. Indias Digital Society initiative, for example, sets out key
focus areas and pillars, administrative oversight, and anticipated costs and challenges. A welldesigned digitisation strategy will harmonise policies across the public sector, while enabling the
interconnection of the services of disparate agencies under a common digital platform from the outset.
As they formulate a digital strategy, public policy makers need to take a long-term view. For example,
governments in emerging markets need to balance the delivery of digital services that solve
immediate challenges around lack of access to financial, education or health services, with the need to
create policies that are robust enough to accommodate future high level digital lifestyle services, such
as smart infrastructure. To that end, governments need to incorporate the views of key stakeholders in
a transparent policy formulation process led by individuals with adequate industry knowledge. Rather
than simply reacting to events, policy makers now have the opportunity to lead the development of a
digital society. They should take that opportunity.